(Witness: Zappone.)

lower prices were quoted; so that these proposals for supplies are strictly in compliance with the law and are passed upon by this board of assistant secretaries and approved by them. They constitute, I should say, nearly seven-eighths of the supplies used by the Department of Agriculture during the year. The other oneeighth consists of materials and supplies the need for which could not be anticipated. Often they are technical supplies, and even though they might be purchased in the open market under exigency, or where the amount is less than $50, it is the policy of the Department of Agriculture to invite bids on these informally, thereby securing competition wherever practicable. These informal bids are passed upon by a board of awards, which our chief clerk just referred to, consisting of three members, as per order of the Secretary, which follows:

Col. S. R. BURCH,

DEPARTMENT OF AGRICULTURE,

OFFICE OF THE SECRETARY, Washington, D. C., July 1, 1905.

Chief Clerk of the Department of Agriculture.

Mr. M. E. FAGAN,

Cashier of the Department of Agriculture. ·

Mr. C. O. GOODPASTURE,

Clerk in the Bureau of Animal Industry.

GENTLEMEN: You are hereby constituted a board of award charged with the duty of opening, examining, and reporting upon informal bids and proposals of all kinds for furnishing supplies and for performing service for this Department, including all the bureaus, divisions, and offices thereof (except the Weather Bureau), during the fiscal year beginning this day and ending June 30, 1906 (see par. 8 to 11, inclusive, of the Fiscal Regulations of the Department of Agriculture).

In the performance of your official duties under this assignment you are authorized to call upon the several chiefs of bureaus, divisions, and offices for information, for expert advice upon questions relating to the character of the supplies or services offered upon bids, and in ascertaining the adaptability of such supplies to the requirements of the service.

You will give careful and equitable consideration to all proposals that shall be placed before you, and you will, without fear, favor, or partiality, recommend such action thereon as will, in your respective judgments, best subserve the Department's true interests.

Very respectfully,

JAMES WILSON, Secretary.

When necessary the board secures recommendations from the chief of the bureau or division for which the articles are intended, calls for expert knowledge when required, and make awards accordingly. I also submit the following extracts from the Fiscal Regulations of the Department of Agriculture relative to the purchase of supplies:

Regulation 8. All officers, agents, and other employees of this Department are positively forbidden to make a purchase, to give an order for supplies of any kind, or to incur any expense whatever in connection with the public business without first having obtained a formal written order, requisition, or letter of authorization, signed by the Secretary or other official delegated by him, except in cases of extreme necessity, in which the public property might otherwise be subjected to great danger of loss or damage, or in which the public interests might be liable to suffer serious injury from the delay involved in procuring prior authorization.

Regulation 9. All requisitions must be countersigned by the Chief or Assistant Chief of the Division of Accounts before being sent to dealers. All letters of authority will be drawn in the Division of Accounts. Memoranda should be furnished to that division setting forth in reasonable detail the character, pur

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(Witness: Zappone.)

pose, and amount of each contemplated expenditure for which authority is desired. Every application for a letter authorizing travel must state specifically the character of the business to be transacted and for which the travel is to be performed. Such vague phrases as "on official business," "on business connected with," etc., do not afford data sufficient to determine whether the expenses of the contemplated travel are legally chargeable to the appropriation named in the memoranda.

Regulation 10. In all cases, when practicable, supplies must be procured upon contracts to be made after advertising for proposals, as required by law. The only exceptions to this requirement occur when the exigencies of the service necessitate immediate delivery and in cases where competition is not possible. Competition must be secured in every case when practicable. The Chief and Assistant Chief of the Division of Accounts will, before passing upon a proposed expenditure, require evidence showing that the law and the regulations requiring competition have been complied with in every particular.

Regulation 11. Whenever it shall be found necessary in the Department at Washington, after the contracts for annual supplies have been awarded, to use articles not embraced in any such contract, and when the estimated cost of such articles shall amount to $1,500 or more, new advertisements should be prepared for publication in newspapers in the usual manner and form. When supplies shall be required the aggregate cost of which shall be estimated at less than $1,500, advertisement may be made by letters prepared on blank forms provided for that specific purpose inviting proposals, such letters to be mailed or otherwise delivered to a reasonable number of responsible dealers in the goods required. Articles not provided for in any existing contracts, if required for immediate use; if of a special kind, patented articles for instance, and not procurable except from a single source; or if of an estimated value so small as to render advertising for proposals impracticable, may be purchased in open market at the lowest obtainable prices. In every such case, however, the application for a requisition or letter of authorization must state in specific language the character of the exigency that renders the procuring of bids impracticable. The exigency must be stated in writing before the purchase is made. In all cases where an intended purchase is to involve an expenditure of $50 or more, and it is found to be impossible or impracticable to obtain competitive bids, the following principles should be embodied in an exigency statement, to accompany the application for a purchasing requisition or to be made in explanation of a purchase without competition under a letter of authority, the statement in the latter case to accompany the account :

First. It must be clearly stated and shown that the article, services, or supplies are needed for immediate use, and that the delay necessary for the purpose of obtaining bids would prove injurious to the interests of the Government; and

Second. It must be clearly stated and shown to the satisfaction of the Division of Accounts that the particular article, services, or supplies are the only kind that can be used for the purpose for which they are intended, or can only be procured from the person on whom the requisition is drawn; and

Third. In all cases the statement must be made that the price set forth is the lowest obtainable, is just and reasonable, and was ascertained by correspondence or personal investigation.

All purchases of materials for the furnishing of which contracts have been awarded must be made from the contractors, even if such materials can be procured elsewhere at lower prices than those specified in the contract.

Improvements in the present departmental methods of purchasing supplies have been fully considered by the Keep Commission, and as their recommendations to the President in regard thereto have already been made public, I take the liberty of submitting a copy herewith:

To the PRESIDENT:

TREASURY DEPARTMENT, Washington, December 6, 1906.

The committee on Department methods submits herewith its report on the standardization and method of purchase of Department supplies.

This subject had much attention from the Dockery Commission in 1893. On its recommendation section 3709, Revised Statutes, was amended so as to pro

(Witness: Zappone.)

vide that contracts for purchase of Department supplies should go before a board of award, composed of an Assistant Secretary of the Treasury, an Assistant Secretary of the Interior, and an Assistant Postmaster-General, for approval. The purpose of the Dockery Commission in creating the board of award was to secure reasonable uniformity of price and practice in contracts for Department supplies by establishing a board or commission to compare the awards recommended by the various Departments, so that approval might be refused in case an excessive price was to be paid by any one Department, as compared with the others.

While something has been accomplished in securing uniformity of price since 1893, the real purpose of the amendments approved by the Dockery Commission has not been secured. The law still leaves each Department to prepare its own schedule of supplies needed. Each Department publishes its own advertisement. receives its own bids, and makes its own recommendations for awards to the board of award. The schedules prepared in the different Departments differ materially in the qualities of the various articles called for. There has been no attempt at the standardization of supplies. The result is that when the recommendations of the different Departments are scheduled and assembled for consideration by the board of award the schedule is extremely complex, comprisIng nearly 2,500 different kinds and qualities of supplies.

In most cases the bids are based on samples in the possession of the various Departments, which it is not practicable to produce before the board of award. Thus the different Departments continue to buy different articles for the same purposes, and cooperation between the Departments in reducing the complexity of the schedule and the standardization of supplies is not attained. because the departmental cooperation provided for in the board of award takes place at too late a stage in the process of purchase. The remedy for this condition is an obvious one, and we submit herewith a careful and concise report from our assistant committee on supplies, recommending important and specific changes in the present methods. These changes, with two modifications hereinafter noted, meet our full approval and are earnestly recommended.

Briefly, the plan proposed by the committee is as follows: Provision is made by which the preparation of schedules, advertising for proposals, and making of contracts for the purchase of Department supplies are placed in the hands of a board, to be known as the general supply committee, such board to be under the supervision and control of the Secretary of Commerce and Labor. The head of each Department or independent bureau is to designate one expert employee of his Department or bureau to serve as a member of such a board. The board thus constituted is to purchase the Department supplies heretofore acted upon by the board of award.

In an opinion rendered by the Attorney-General to the President, May 28, 1906, the Attorney-General held that an amendment to the present law would be required to make this change. Such an amendment has been prepared and is submitted herewith.

The report of our assistant committee discloses in only a small degree the great care and labor of the committee in considering this subject. It has had before it the purchasing officers of the various Departments and has compared the qualities and grades of the various articles purchased by them. It has begun and carried about half way to completion a standardized schedule of Department supplies. Its intention was to complete this schedule before submitting its report, but in order that action may be taken at the coming session of Congress it was decided to present the report, showing the plan proposed, before the completion of the standardized schedule. Sufficient progress has been made, however, in the preparation of this schedule to show that the number of grades and qualities of articles purchased for Government use can be greatly decreased.

This will reduce the complexity and the clerical labor involved in the work and secure for the Government supplies of standard quality under properly prepared specifications. Moreover, the purchase of large quantities under the concentrated system may be expected to result in reduced prices. To indicate the lack of standardization under the existing practice we may say that the Government is at the present time purchasing 28 different kinds of ink, 278 different kinds of pens, 11 different kinds of typewriter ribbon, and 132 different grades of pencils. One Department is paying $1.70 per dozen quarts for ink; another is paying $3 per dozen quarts. Similar conditions prevail as to many other articles on the schedule.

(Witness: Zappone.)

It may be urged that it does not necessarily follow that the establishment of . a general supply committee will result in standardization. Some time ago Congress provided that the purchase of envelopes for all the Departments should be concentrated in the hands of the Postmaster-General. For some years thereafter each Department supplied to the Postmaster-General a list of the different kinds and qualities of envelopes required, and a schedule for purchases, containing specifications for all these different grades and qualities, was prepared in the Post-Office Department. Centralization of purchase, therefore, at first brought no result in the way of standardization, but during recent years this has changed, and the number of grades and kinds of envelopes purchased has been much reduced. Noncommercial sizes, requiring manufacturers to have special machinery, and therefore only obtainable at high prices, have been stricken from the schedule, and the process of standardization still continues. One of the main purposes of the creation of the general supply committee here recommended being to standardize, it is fair to assume that it will perform its duty in this respect. The immense labor already performed by our assistant committee in the preparation of a standardized schedule will be available for the use of the new committee.

Other results to be expected from the concentrated purchase system are improved specifications, drawn so as to require the essential qualities, but not to call for an unnecessary and expensive excellence, as many Government specifications now do.

It is clear that no general purchasing agency to make purchases for the entire Government is practicable. The military departments must obviously have their own methods of purchase, under military organization, developed in time of peace so as to be capable of great expansion in time of war. So, also, it may be necessary that the scientific bureaus of the Government be allowed to purchase, to a considerable extent, their own scientific apparatus and technical supplies. The Departments dealing with public works, needing bulky supplies at a distance from Washington, must continue to purchase them as at present. The Department supplies proper are, however, with few exceptions, bought and delivered at Washington, and are examined here by the Department purchasing officers, although a considerable part of such purchases are afterwards shipped to the outside service. It is these supplies the purchase of which it is proposed to concentrate.

The general supply committee, however, would develop experts whose services could be used to great advantage by purchasing officers, even where the supplies themselves were not purchased directly by the general supply committee. Thus, many officers in the Government service have occasion at times to make purchases, but have not in their offices the necessary technical knowledge to prepare proper specifications therefor. One of the important functions of the general supply committee would be to prepare and supply, in response to the requests of any Government officers, suitable specifications to be used in the purchases of any desired article.

We are of the opinion that it is better to begin the concentrated purchase of supplies by covering a field too small rather than too large. If the concentrated system develops as it should its field of operations can be widened, as the work of the Civil Service Commission has been from time to time extended. Should the central office be overloaded at the start it might result in a want of efficiency at the beginning which would discredit the system. In the field covered by our recommendations there is no doubt in our minds that a centralized system of purchase would from the start secure great advantages and be easily put into operation. We have recommended that the general supply committee be under the jurisdiction of the Department of Commerce and Labor, because of the existence in that Department of the Bureau of Standards. This Bureau is in a position to furnish material assistance in the preparation of standard specifications and in establishing a well-devised system for testing supplies when received.

The two modifications which we desire to make in the report of our subcommittee are as follows:

First. That the Secretary of Commerce and Labor shall appoint the chairman of the general supply committee.

Second. That as legislation is necessary to institute the proposed plan of purchase, provision should be made in such legislaton for a reasonable extension of the system from time to time in case it is found to work well.

(Witnesses: Zappone, Cochran.)

To accomplish this result we propose two slight modifications of the amendment to section 3709, proposed by our assistant committee, by inserting therein a provision that the President may, by Executive order, from time to time extend, within reasonable limits, the field of operations of the concentrated purchase system and by providing therein more specifically for the organization of the proposed general supply committee.

Accompanying this report are the following papers:

First. The report of the assistant committee on supplies.

Second. The opinion of the Attorney-General hereinbefore referred to.

Third. The report of the Dockery Commission on this subject.

Fourth. The amendment to section 3709, Revised Statutes, recommended by our assistant committee and modified by us.

Our recommendations are as follows.

First. That the attention of Congress be called to this subject, in order that the necessary legislation may be obtained.

Second. That after such legislation shall be obtained the concentrated purchase system be put in operation by Executive order.

Respectfully,

C. H. KEEP,

LAWRENCE O. MURRAY,

JAMES RUDOLPH GARFIELD,

GIFFORD PINCHOT,

Committee on Department Methods.

JANUARY 12, 1907.

(Part of testimony given on above date before Committee on Expenditures in the Department of Agriculture.)

STATEMENT OF MR. W. E. COCHRAN, PURCHASING AGENT FOR THE POST-OFFICE DEPARTMENT, ACCOMPANIED BY MR. M. W. P. ZANTZINGER, OF THAT DEPARTMENT.

(The witness was sworn by the chairman.)

The CHAIRMAN. Will you please state your official position?

Mr. COCHRAN. I am the purchasing agent for the Post-Office Department.

The CHAIRMAN. How long have you held that position?

Mr. COCHRAN. Since the 1st of July, 1904, when the office was created.

The CHAIRMAN. And before that time were you in the employ of the Department?

Mr. COCHRAN. I was the chief post-office inspector.

The CHAIRMAN. So that for nearly three years you have been engaged in this purchasing department?

Mr. COCHRAN. Yes.

The CHAIRMAN. And had the charge of it?

Mr. COCHRAN. Yes, sir.

The CHAIRMAN. That was from the time when that bureau was established?

Mr. COCHRAN. Yes.

The CHAIRMAN. Our attention has been called to the fact, in connection with our examination of the purchase of supplies by the Agricultural Department, that it was thought by one of the parties interested in that Department that the fact that supplies in some instances were purchased in large amounts deprived people who were situated so that they could produce only smaller quantities of the op